Vietnam to Exit Short-term Stimulus, Tighten Gold, Forex Transactions

Vietnam will halt its short-term subsidized lending program at the end-2009 as economists call a preemptive and necessary move to stabilize the macroeconomic situation and ensure the sustainable growth.

 

The move is part of bold measures the government has taken, including raising the benchmark interest rate by one percentage point effective from December 1, devaluing the dong by 5.4% after the deterioration seen in the country’s trade deficit, a drain on forex reserve and a sharp rise in inflation at 4.35% in November.

 

“This is a necessary move aimed at stabilizing the macro situation and ensuring sustainable economic growth,” Minister-Chairman of the Government Office Nguyen Xuan Phuc said at the press conference on December 1.

 

Minister Phuc also said the government will continue the medium and long-term subsidized loans next year.

 

Deputy Governor Nguyen Dong Tien of the State Bank of Vietnam, the country’s central bank said the short-term stimulus exit together the decision to adjust the forex rate and hike the base rate will help stabilize the domestic market.

 

Thanks to the subsidized loans, the domestic economy is gaining momentum on its recovery track after it recorded 3.1% in the first quarter, 4.5% in the second, 5.8% in the third and it is expected to grow 6.8% this quarter.

 

Under the program launched in early February, about VND400 trillion (US$21.64 billion) will be phased out by the year-end, the government said on its website Wednesday.

 

The government also authorized the central bank to set up special taskforces to increase surveillance and put gold transactions under control, Deputy Governor Tien said.

 

Vietnam targets to achieve the gross domestic product (GDP) growth of 5%-5.2% this year, state media reported. (chinhphu.vn)